Sunday, September 22, 2013
Bribing us with our own money
When a fire is raging, it is not always the best idea to throw on more fuel. But the Governmentâ€™s Help to Buy Scheme is doing exactly that, a policy so weighted towards encouraging sub-prime lending that house builders are selling the packages as state guaranteed discounts. It remains difficult to understand how a supply problem â€“ not enough houses â€“ can be solved by a demand-enducing policy that could result in Â£130bn of government-guaranteed mortgages. What we do know is that rates of house building are stubbornly unresponsive to house price increases. The argument that higher demand will necessarily lead to higher supply is undermined by the fact that any increase in supply is likely to be insufficient to keep prices under control.